Why Robots Will Win the Coming Trade Wars

7/29/17

from Maudlin Economics,

7/25/17:

The first step to surviving a war is knowing which side you are on. But in a trade war, that’s not always easy.
Suppose the US imposed tariffs on steel imported from the European Union. Prices on goods made with that steel would probably rise, but this would affect you only to the extent you rely on those particular goods.
When the EU responded by slapping tariffs on items “Made in USA,” it would hurt you only if your livelihood depended on those export revenues.
Of course, we may be headed toward a wider trade war, which could cause more general price inflation, hurting everyone in some way—though I think it will be more targeted at first.
But one group is sure to win in a trade war because demand for their services will skyrocket.
Who are these lucky people?
They aren’t people at all. They’re robots.

So how do robots fit into this? Stay with me, we’re getting there.

Automate or Die

My associate Robert Ross and I knew after the election that trade barriers would probably rise. In war-gaming the consequences for Macro Growth & Income Alert subscribers, we saw an opportunity in industrial automation and robotics companies.
In particular, we wanted automation suppliers based outside the US that would have better access to countries the US government might try to punish. We found several candidates and recommended one to subscribers in January.

An almost-16% gain in just six months is nothing to sneeze at, but I think it’s just the beginning.

U.S.-Mexico Rift Deepens Over Trade Threat

Mexican President Enrique Peña Nieto canceled a visit to the U.S. next week amid pressure from President Donald Trump to pay for a border wall, in the biggest diplomatic rift between the neighbors since the North American Free Trade Agreement was implemented in 1994.
The friction deepens the uncertainty about Nafta’s fate that has hurt Mexico’s economy and could delay Mr. Trump’s stated plan to renegotiate the agreement—if he doesn’t choose to scrap it altogether.
Mr. Trump on Wednesday had ordered government officials to begin planning a “physical wall” on the border with Mexico, following through on a central campaign promise to crack down on illegal immigration.
After Mr. Peña Nieto told his country that Mexico wouldn’t pay for it, Mr. Trump tweeted early Thursday: “If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.”

The Mexican president tweeted his decision not to come later Thursday morning. He said Mexico remains “willing to work with the U.S. to reach agreements that would benefit both nations.”
Mr. Trump afterward told a gathering of House and Senate Republicans in Philadelphia that the two leaders had agreed to cancel the meeting, which had been set for Tuesday. “Such a meeting would be fruitless and I want to go a different route,” Mr. Trump said.
It is an improvisational style that worked for him in the world of commercial real estate but has little parallel in international affairs. Rather than deliver his warning to Mexico in a formal statement or speech, Mr. Trump made his views known in Twitter bursts.

He made use of his leverage as president, suggesting Nafta could be a bargaining chip in his push to get Mexico to pay for the wall. And it wasn’t clear if he was bluffing with his suggestion that he wasn’t concerned that Mexico might cancel the meeting.
Explaining his approach in his 1987 book, “The Art of the Deal,” Mr. Trump wrote that his style is to “aim very high,” and then to keep “pushing and pushing to get what I’m after.”
“Sometimes I settle for less than I sought,” he continued, “but in most cases I still end up with what I want.”